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Is workforce planning the new secret weapon for finance?

I’m in the workforce business. As head of HR, it’s my job to locate, attract, nurture, and retain the best people on the planet to work for and flourish in my business. It’s exciting work: People are the engines of innovation and revenue, and the culture you create defines how you do business. They’re the source of your company’s competitive edge.

Yet many organizations, while acknowledging the importance of people to their success, seem to take only a passing interest in the importance of workforce planning, if they think about it at all.

I remember sitting across the table from a C-level executive at a new employer years ago. I asked him about his expectations for workforce planning at the company.

His answer shocked me: “I’d just like to know how many people work here.”

There’s a lot to unpack from that anecdote, but what sticks with me is that, to this executive at least, workforce planning amounted to correctly counting heads.

Such a narrow view is limiting to your organization as a whole and in particular to finance. Though all things workforce have traditionally been the purview of HR, finance should care deeply about how and where people are deployed, how well skills and capabilities are aligned to the current and developing needs of the company, how closely capacity meets demand, and how prepared various business units and departments are to hire, onramp, train, and cultivate employees as the business grows.

Finance should focus on workforce planning not just because your workforce represents your company’s largest single expense, but because a workforce plan developed strategically and in partnership with finance is a secret weapon any company can wield to be more agile and successful.

They’re more than FTEs

Workforce planning is also strategic because your employees are different from any of your other strategic assets. People are complex. Each employee is unique, with his or her own strengths, weaknesses, challenges, and personality. Every employee impacts your organization differently, and hiring the best team can truly propel an organization’s success.

This is why modern workforce planning looks at more than full-time equivalents (or FTEs, the shorthand for a traditional employee with benefits) and their fully loaded costs. It involves looking at your talent through a broader lens.

For instance, the traditional top-down approach to developing a workforce plan usually starts with finance, which advises HR that the company will need to hire, say, 200 new employees over the next year to meet its revenue targets. You might receive a set number of open headcounts per department or business unit based on projected revenue by function. Then it’s up to HR fill those positions with the best possible candidates at a certain projected cost. In most organizations, that’s the beginning and the end of finance’s role in workforce planning. And this is often the limit to the partnership between HR and finance during this critical planning process.

HR and finance: a marriage

It can be so much more, however. While HR does focus on metrics that naturally concern finance, including salary, attrition, retention, turnover, cost of benefits, and more, HR has a broader lens for viewing the workforce—one I believe finance should share. What kind of people do we want to attract? What skills will we need in the future that we don’t have today? How do we build a culture that engages workers fully, so they don’t increase costs by calling in sick or leaving after 18 months?

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The answers to these questions virtually never come out in a financial plan, but they absolutely impact your company’s financial performance. Turnover is costly. So is a skills gap. By collaborating closely with finance, HR professionals can help model these inevitabilities to prevent unexpected costs and reduce risk—both classic goals for finance.

Yet there’s more that HR and finance can do together. For instance, whenever you hire someone, they have a rippling impact on your organization that goes beyond their paycheck. They require space and technology and require support from various internal organizations to be properly onboarded, do their job well, and remain engaged. If you’re opening an office in a new location, particularly internationally, those costs mount quickly.

Strategic from the start

In most organizations, these considerations are an afterthought—the result of what I call “brute force” planning: Hire 200 people, then sort out the details during the recruiting process, or even worse, once they’re on board. A far more strategic practice is to integrate these factors into the workforce plan from the beginning.

Folding these projects into the workforce plan from the start is the strategic approach, and it works best when finance and HR plan together. That’s the strategic sweet spot for workforce planning—the place where strategy, finance, and people all meet. And when they have access to a modern planning platform that integrates the workforce plan with the corporate financial plan, they’re certain to always be on the same page.

Reducing cost, minimizing risk, avoiding surprises—they’re all reasons workforce planning should be the product of a happy and collaborative marriage between HR and finance. And they explain why workforce planning may well be the new secret weapon for finance.